(26 SEPTEMBER 2018)DAILY MARKET BRIEF 1:Merkel weakness doesn’t faze Euro

Is Angela Merkel seeing the beginning of the end of her long run as German Chancellor?
Yesterday’s vote for her party’s parliamentary head suggests as much. The Christian Union parties unexpectedly dumped Volker Kauder, a close Merkel ally, and instead elected Ralph Brinkhaus. This adds further pressure to Merkel’s leadership and boosts opposition parties (the right-wing AfD, for instance) that hope to end Merkel’s grand coalition. Still, it was not a rout – the vote was close, and the newly elected party chairman confirmed that he would be backing Merkel. All in all, it is a weak revolution within CDU/CSU coalition.

So we see no reason for German growth to slow down in the second half of 2018. Domestic demand continues to support the economy, especially services, although manufacturing is deteriorating amid US protectionism. Economic indicators are encouraging. Trading along 1.1767, EUR/USD is expected to bounce higher, heading along 1.18.

By Vincent Mivelaz